Liberty Global's planned spinoff is among a handful of strategic moves that include the formation of a new holding company for Telenet and VodafoneZiggo, and of a UK 'Fixed NetCo' covering Virgin Media O2's HFC and fiber homes.

Jeff Baumgartner, Senior Editor

February 19, 2024

3 Min Read
A logA logo sign outside of a facility occupied by Liberty Global in Denver, Colorado, on July 22, 2018.o sign
(Source: Kristoffer Tripplaar/Alamy Stock Photo)

Liberty Global plans to spin off 100% of Sunrise Telecom, the unit serving parts of Switzerland, in the second half of the year. That plan fits into a broader "strategy update" announced Friday (February 16) that also includes the formation of a new holding company for Telenet and VodafoneZiggo, and a "fixed NetCo" spanning 16 million homes served by the company's hybrid fiber/coax (HFC) and fiber-to-the-premises (FTTP) networks.

Liberty Global believes the Sunrise spinoff will create a "fully-distributed local valuation" for Sunrise, a unit it considers a "best-in-class FMC [fixed mobile convergence] champion." Liberty Global also believes the local listing of Sunrise – poised for a listing on the SIX Swiss Exchange with two classes of shares – will attract new investors and establish distinct investment profiles for both Sunrise and Liberty Global.

"The proposed spin-off of Sunrise to Liberty Global shareholders is aligned with our strategy of unlocking value by allowing our shareholders to directly participate in the future performance of Sunrise," Liberty Global CEO Mike Fries said in a statement.

Liberty Global also has committed to invest about $1.7 billion into Sunrise before the spinoff as part of an effort to cut its debt leverage to a range of 3.5x to 4.5x (Sunrise currently has $7.3 billion of debt, or 6.3x leverage).

The proposed spinoff, slated for the second half of 2024, is expected to be tax-free for US shareholders of Liberty Global, the company said.

Analyst scrutinizes spin

Some analysts aren't sold on the idea. Liberty Global might be better served using the cash to buy back its own stock "rather than to inject it into a public market asset which is likely to trade at a slight discount to its full value," New Street Research analyst James Ratzer explained in a research note. "Although we are seeing some signs of a turnaround in Sunrise and the Swiss market, we believe investors will be unlikely to give full credit to a turnaround in a public listing."

Sunrise finished 2023 with 2.7 million homes passed, 1.18 million broadband subs, 1.19 million video subs, 934,200 telephone customers and 2.83 million mobile subs. The unit posted Q4 2023 revenues of $897.5 million, up 11.7% versus the year-ago period, and adjusted EBITDA of $287.4 million, up 16.1%.

Here's a rundown of the other strategic moves Liberty Global outlined:

  • The creation of Liberty Global Benelux as a holding company for Telenet (Belgium) and VodafoneZiggo (the Netherlands). Liberty Global reasons this will create synergies and efficiencies and that it's a "natural pairing" of two FMC-focused companies that are operating in "rational, three-player markets with significant scale."

  • The creation of a UK "Fixed NetCo" within VMO2's footprint of 16 million HFC and fiber homes. Liberty Global believes this move will put a greater focus on fiber upgrades and wholesale revenues via a dedicated team, strategy and balance sheet. Liberty Global also reasons that the NetCo could create an "acquisition vehicle" that can drive consolidation of the UK's fragmented altnet market. Ratzer believes the formation of the NetCo could make it easier to sign wholesale deals with TalkTalk/Vodafone or Sky, and possibly clear the way to sell a minority stake in the asset. The NetCo is separate from nexfibre, a joint venture between Liberty Global (25%), Telefónica (25%) and Infravia (50%).

  • The sale of All3Media to Redbird IMI, pegged to raise $400 million of cash proceeds. All3Media is a 50/50 content joint venture of Liberty Global and Warner Bros. Discovery.

  • A plan to buy back 10% of stock in 2025.

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Europe

About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

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